TY  - BOOK
AU  - Darwin,Tristan
AU  - Treepongkaruna,Sirimon
AU  - Faff,Robert
TI  - Determinants of bond spreads: evidence from credit derivatives of Australian firms
SN  - 03128962
AV  - HD31 AUS 
PY  - 2012///
CY  - Los Angeles
PB  - Sage
KW  - Credit default swap
KW  - Credit spread |
KW  - Merton model
N2  - This paper investigates the determinants of credit spreads (levels and changes) via credit derivatives, using an Australian sample. We incorporate a number of different relationships to assess the contributions of various market-wide and firm-specific factors in determining levels, and changes in credit spreads, of corporate bonds. Using over-the-counter credit default swap (CDS) premium data as a proxy for the default risk of the entity, we find that both CDS and liquidity are priced into credit spreads, with liquidity explaining more credit spreads than credit risk (proxied using CDS premia) itself. We also find that a number of firm-specific and market-wide variables, namely, firm leverage, market-to-book ratio, market value, volatility, liquidity, the spot rate, the slope of the yield curve, the time to maturity of the underlying bond and the level and return on the All Ordinaries Index, are in many cases significant determinants of credit spreads. Finally, in additional robustness testing, a potential sample selection bias is accommodated via the Heckman ((1979)
UR  - https://doi.org/10.1177/0312896211416137
ER  -